If you said No, you’re lying to yourself.

Financial media is media first, and financial information second. So it must be entertaining to get ratings and pay the bills.

That’s why CNBC has people debating all day long, because everyone loves a fight.

It didn’t used to be that way. The shift away from pure reporting to the debate model rose slowly for years at CNBC but spiked as the crisis escalated in 2007.

I switched to Bloomberg TV as my background noise around that time. Much more subdued anchors and a more hard news tone. But they have that luxury since TV is gravy and the real money comes from their data services.

Still, even Bloomberg is now slowly shifting toward entertainment flair: cooler bumper music into and out of commercials, more multi-anchor debates, and more CNBC folks coming on board.

The latest is Trish Regan who joined this week. She was a CNBC fixture before defecting, and like Margaret Brennan before her, she’s starting off brash—more CNBC than Bloomberg.

In Brennan’s early Bloomberg weeks after she left CNBC in summer 2009, she was the same way: very strong opinions, more pushy with guests and fellow anchors.

Which you could argue is good journalism, but it’s just a form of in-your-face financial entertainment that CNBC pioneered.

Up to now, Bloomberg is far more journalistic in my view. The calmer demeanor of their anchors—including the young guns like Matt Miller and Julie Hyman—lets their sources and the issues shine, which is what journalism is all about.

Brennan has transformed and now embodies this traditional Bloomberg model. Great journalist first, star/entertainer second.

Now it will be interesting to see if Regan follows the same path of conforming to traditional Bloomberg tone. Feels less likely though because one of her top tasks in 2012 is election coverage. By its very nature, political coverage is about heated debates. It gets ratings too. Regan knows this.

Which means we may see the ever-composed Al Hunt slowly fade as Bloomberg’s politico and Regan rise up in his place, rewriting Bloomberg’s formula as she does. Journalists are ever-composed. Stars rise. So the thing to watch will be whether Regan can bring the two together.

All that said, now back to the question: should financial media be entertaining?

Yes it should be. But not at the cost of the journalism.

So where does this leave the consumer?

Financial media is a way to keep up on markets, but consumers will never develop a sound retirement plan from a trader’s 90-second spot sharing his latest picks, and they’ll never figure out whether it’s time to buy a home in their local area by watching several anchors chatter about national home price data with Robert Shiller.

So why am I saying all of this?

These financial media vs. entertainment vs. actual financial advice concepts have been rattling around in my head because of a comment Tadas Viskanta made last week on his Abnormal Returns blog.

He said that 2012 market outlooks flooding financial media right now are more about self-promotion for the investor than they are about actual investing. He made the point as an intro to a piece he ran by financial advisor Carl Richards entitled Investing Is Not Entertainment.

Go read it. It’s a great reminder that there’s a distinct line between entertainment and managing your finances.

Of course the piece (which is a book excerpt) is done by a financial advisor who’s become a fixture in financial media because he’s incredibly entertaining.

So where are those lines again between financial media, entertainment, and actual advice? Very blurry…

While we’re on Wells, its economic team notes the following on housing:

Most of the economic reports dealing with housing have shown a little more strength recently. New home sales rose, sales of existing homes climbed, and new home construction has also improved lately. Low mortgage rates, an improving job market, and some reported easing in mortgage underwriting standards has raised hopes that the momentum will carry over into 2012. The news has not been universally positive. The latest S&P/Case-Shiller data shows price declines accelerating in October. The 20-city index fell 0.6 percent in October and has tumbled at a 6.4 percent pace over the past three months. Home prices are down 3.4 percent over the past year. Moreover, price declines have been fairly widespread, with 16 of the 20 markets surveyed reporting price declines in October. The sharp drop in home prices over the past three months should raise some caution flags for those expecting dramatic gains in 2012. That said, 2012 will be a better year. We have slightly increased our forecast for the next two years, which marks the first time we have raised our expectations for housing in any significant way in well over a year.

But what’s good for housing isn’t always good for those in the mortgage business. Despite record low mortgage rates, 2011 has seen a surprisingly high level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence. Analysts say tight lending standards and a search for yield by investors (NOO purchases) has driven all cash purchases of homes higher. Per the report, 38% of homes purchased in 2011 were bought with all cash, up from 34% in 2010, and double the 19% rate in 2006.

A better housing market would certainly help the housing agencies, as WSJ veteran Holman Jenkins says in his editorial called The Fannie & Freddie Hate Storm:

So where ultimately do Fannie and Freddie rank amid the confluence of ridiculous subsidies, private-sector opportunism and ungovernable global capital flows that contributed to the crisis? Who knows exactly, but the exaggerated ferocity of the debate lately is a reliable Washington hallmark of an argument fading into irrelevancy. The financial crisis isn’t over, and around the world the problem is not housing but governments whose commitments far exceed their resources.

Free market capitalism depends on a balanced market between labor and capital. And clearly we’re reaching a point where impoverished main street cannot afford to buy the goods that capitalism so magnificently produces. So i think there’s an exhaustion here in terms of free market capitalism that has worked so well for 20 to 30 to 40, 50 years, but now is reaching structural impediments that prevent, you know, strong growth that we’re used to.

My favorite Haines legacy is the Briefcase Indicator, a segment he’d do in the mornings before Alan Greenspan’s Fed meetings. He’d watch Greenspan walking from his car to his office and study the contents and weight of Greenspan’s briefcase for clues as to the day’s FOMC decision—he’d do close-ups, parse every single aspect of the briefcase, study how Greenspan walked, and carry on the segment for several minutes at a time. With anyone else, it would have been just another BS gimmick, but somehow it always carried requisite credibility along with the entertainment factor. That was the magic of Mark Haines, a man who’s legacy will live eternally in financial media.

Another big financial media figure Steve Forbes is pushing for a complete and immediate severance of all the government’s ties to Fannie and Freddie. Forbes believes that a sharp wind down of the GSEs and the implementation of 20%-minimum down payments indicates a return to more conservative underwriting guidelines. “Not so long ago it was the norm in this country to put down 20% on a house. Other abandoned customs: limiting a mortgage to no more than four or five times a family’s income, with the maturity of that debt rarely exceeding 20 years. Government pressure trashed these standard practices, which had once made the home mortgage the soundest of securities. We’re still living with the consequences of the federal government’s fecklessness.” Forbes believes the quick dissolution of Fannie and Freddie will quickly revive the secondary mortgage market.

But the National Association of Realtors, community banks, and probably practically everyone in the mortgage business tend to believe that a drastic withdrawal of government, or a dismissal of government insured loans, could slow the recovery and shut out deserving borrowers. In addition, although there have been steps made toward having “private money” re-enter the mortgage market, most would agree that it is in no way ready to step into the private and secondary markets quite yet. In fact, the government continues to be involved, as we all know – the Federal Reserve Board held a teleconference late last week to clarify some outstanding issues/questions about the comp issue.

At least banks seem to be on sounder financial footing. Wells Fargo’s board has increased its authority to repurchase the company’s common stock, and will pay a special 1Q2011 dividend on top of its existing dividend. JPMorgan Chase is raising its dividend, and its board has authorized a $15 billion stock repurchase program. And Goldman Sachs said that it will redeem preferred stock that it sold to Warren Buffett’s Berkshire Hathaway in October 2008. Goldman was waiting for the Federal Reserve to sign off on its capital plans before acting. And my 100 shares of Citi just turned into…10 shares. But at least it will be paying a 1 cent per share quarterly dividend.

For another consumer-friendly muni take, CNBC’s John Carney just wrote a truly readable and relevant series on the muni debate. He explained in simple terms why some money managers are defending munis, why their case may be wrong, and how municipal bonds have begun behaving like mortgage bonds did right before mortgages leveled global markets. Here I’ve highlighted the best links. Start with that last one and you’ll see Carney’s links to the whole series. But first, see what some market vets I talk to say below.

The Question:
Hey, do you guys have quick thoughts on if State/Local defaults would hurt or help MBS/Treasuries? Just testing theory on MBS perhaps benefitting in 2011 from muni trouble because MBS would be a higher quality bet that munis. True or not?

The Answers:
BR, Hedge Fund Analyst:
Without a huge increase in the economy I see about ten states that will come close to defaulting but Obama will bail them out. The implications of which are that the supply of treasuries will increase by roughly $1bn. That would likely be enough to put pressure on rates.

Given the rise in rates from excess supply of treasuries along with the shock to the general public from defaults, I would assume that rates would rise substantially during a longer time period after a short-term period of flight to quality (where rate would benefit, like in 2011). Net-net I think it would be a huge negative to the dollar – as well as rates, which the solar impact alone would raise rates and in conjunction with the exodus of capital would drive rates higher.

Just don’t hold me to that tho, it’s been a long day/night!

GF, Hedge Fund Managing Director:
Many State constitutions have no ability to default based on their constitutions. Also US bankruptcy law has no legal framework for dealing with State bankruptcy.

In my view, economically, some should default, even if not constitutionally allowed. (Constitutions can be amended.) Credit default swaps are pricing default as a real concern. It feels a bit like subprime – where the economic reality was staring you in the face, but people didn’t want to believe it. This is a bit different in that State governments aren’t the same as big banks. There will be more political will for the federal government to try to help. Some local government munis will surely default. But, let’s look at the bigger economic reality. Benefits need to be cut (politically challenging), and taxes need to rise to make some headway. I don’t believe we can grow out of the problem. Also, inflation needs to be higher, but not too much. Inflation will help a bit in some places by making the benefits less economically real. We have already seen a 67% personal tax increase and a 40+% corporate tax increase in Illinois. You also have the federal government talking about eliminating mortgage interest tax deductions among other things, and cutting spending. All of these tax increases and looming spending cuts will take a toll on consumption and thus GDP. As for what happens to MBS/Treasuries … I have no idea! The credit is worse (should push rates higher), the economy is in a long slow deleveraging cycle (should keep rates lower). I think there is still plenty of support in the short to medium term for MBS. I have no insight on precise timing.

Where to put your money: Cash is usually a good option for wealth preservation. Gold will be good until it isn’t. Emerging markets will rally for a while, then implode. I like long-short equity hedge portfolios with a fundamental focus.

I’d love to hear DB’s views.

DB, Global Equity Portfolio Manager:
Agree. There’d be support for MBS shorter-term but further credit stress at the municipal and state level is not a good thing for mortgage backed securities or treasuries long-term. The risk that most folks aren’t really talking about is a big blow out in long term rates in the US. Traditionally rates at the long end have been driven by inflation, however look at greece, spain, portugal and see what happens when the world no longer thinks it’s a safe trade to fund your deficits. The vast majority of the mortgage market is still being subsidized by US taxpayers. If the agencies disappeared and the mortgage market had no govt insurance, the estimates to attract private capital are 400+ bps higher than current rates. What type of rate would you demand to lend your savings for 30yrs to a guy working at Wal-mart (largest employer in the US) at 5x his gross earnings to buy a house in areas with below median home prices and declining working age populations? It’s not 6.5%. Perhaps an interesting poll for the thebasispoint.com. Keep in mind if you need to foreclose it may take you 3yrs and cost a significant portion of principle to complete the process and resell it. If 30yr mortgage rates move up to 8 or 9%, that would be a TKO for the housing market in the states. That’s what central bankers are trying to avoid, allowing the US to slowly rebuild the consumer and public balance sheets. As the political climate has begun to embrace the tough love approach, it will be interesting to see what wins votes as we move into 2012. I think we do work our way through over the next several years, but don’t rule out some bearish scares coming out of the woodwork.

Where to put your money: As an equity guy all I see is earnings earnings everywhere, companies have done a great job of cutting costs, capital investments are way down but what do you expect mgmts have had a wait and see attitude. I’m long global equities, tech is an interesting global consumer play. I bought more basic quality growth and dividend payers in US equity markets, risk adjusted it looks too good. Staying away from long duration fixed income. I bought some EM debt last year as the credit quality is good, however the spreads are no longer juicy. Slightly overweight EM equities. If I had a portfolio of size, I would be looking at some volatility traders or manage futures types. I just don’t have anything like that in the PA and they did great in crisis. Agree with GF, Gold is just a great crisis trade until average investors really think it through and realize it’s just a yellow rock and central bankers are not going back to the gold standard, particularly at $4,000 an ounce. Soros, Paulson, Touradji and the like are just smart enough to play a market corner and get out once it makes a big payoff.

]]> http://thebasispoint.com/2011/02/26/3-cfas-discuss-consumer-rate-impact-of-muni-defaults/feed/ 0 http://thebasispoint.com/2011/02/10/mortgage-101-for-mainstream-media-how-rates-work-why-rates-spiked/ http://thebasispoint.com/2011/02/10/mortgage-101-for-mainstream-media-how-rates-work-why-rates-spiked/#comments Thu, 10 Feb 2011 18:02:21 +0000 TheBasisPoint http://www.thebasispoint.com/?p=7565 Today and every Thursday, Freddie Mac releases results of a survey showing what rates are on single family home loans up to $417,000. And the overwhelming majority of mainstream media reports on the topic today talk about how rates have risen along with Treasuries. WRONG. Mortgage rates referenced in the Freddie Mac survey aren’t tied to Treasuries, they’re tied to mortgage backed securities. Below are three Mortgage 101 stories so that you may understand how mortgage rates work better than the media reporting them to you. The first link also covers what’s happened to rates in recent weeks.

- Rate Spike! CHART: Rates Up 1% Since November
- 2010 Rate Outlook: How Rates Work
- The Fine Print On Mortgage Rate Headlines

]]> http://thebasispoint.com/2011/02/10/mortgage-101-for-mainstream-media-how-rates-work-why-rates-spiked/feed/ 0 http://thebasispoint.com/2011/01/03/the-hopeless-future-of-financial-media/ http://thebasispoint.com/2011/01/03/the-hopeless-future-of-financial-media/#comments Mon, 03 Jan 2011 10:32:11 +0000 Julian Hebron http://www.thebasispoint.com/?p=7075 A new year. Typically the time for a media technique as old as media: recapping last year or predicting this year. But instead of doing that today, below I’m re-posting The Day Journalism Died, a piece I wrote in 2006. It’s not about financial media, but it reminded me what consumer financial media is and can be.

Despite its sensational headline—another media technique as old as media—The Day Journalism Died is actually about the evolution of political media from pure reporting to either (a) unabashed partisan strategy or (b) humor. And despite today’s even more sensational headline, I’m not hopeless about the future of financial media. It’s just that when markets turned ugly in August 2007, a year after I wrote that post, I realized financial news had evolved almost the same way: from something resembling journalism to either (a) covert market strategy or (b) entertainment. Let’s look at these, then at the future of financial media.

Financial News As Market Strategy: This is when market participants use media to tout a strategy they’ve already set up. Traders, money managers and other market players have been doing this for years, and the most famous example is CNBC’s Jim Cramer. For decades before his daily media presence, he was a full-time money manager who would go on CNBC (and elsewhere) to discuss stocks he liked or disliked. The trick was that his funds were already long or short these holdings, and using CNBC, he’d make the trades go his way. He got busted for it, booted from the network, started disclosing his positions at the time of discussing them, and was eventually reinstated. These landmark events made disclosure commonplace in mainstream financial news, but they also reinforced subscribe-to-market-strategy media models.

Financial News As Entertainment: This is when financial news uses age-old media gimmicks or big personalities to make complex content more palatable to consumers. Gimmicks include impossibly hot female news anchors to lure a mostly male audience and, yes, sensational headlines. Big personalities fall into two categories: market observers and market participants. A good example of the latter is Paul Kedrosky: he’s credible because he’s an actual investor, and also entertaining…especially on Twitter. And my favorite example of a market observer is Larry Kudlow, a man who’s not actively participating in markets. He’s one of the best blowhards in the business, and if you doubt that, just look at the What Has You Outraged? banner on his website. He’ll always garner ratings, not because his hardline opinions have market clout but because they’re a form of entertainment.

The Future of Financial Media: A lot has changed since August 2007 but content will always be market opinions, and sources will always be market participants or observers. And here are three ways cheap technology and social networks will continue to change consumer financial media in 2011, and interestingly, they’re all driven by market participants rather than observers.

(1) Financial Blogging. Bigwigs in this area are money managers Barry Ritholtz and John Mauldin. Their blogs aren’t brochures for their investment businesses. They’re just good, entertaining market commentaries that keep their profiles high, which gets them regular mainstream media slots, which is the best and cheapest marketing for their businesses. Finance blogging like this is a boon to the few finance pros who do it right.

(2) Paid Subscriber Media. There’s nothing new about paying for a pro’s market strategies or opinions, but technology makes it cheaper. Which means that countless services do this including Cramer, of course. Problem is that consumers wouldn’t know which service to trust, and why can’t they get this from their own advisors? So the high-hope innovation is a market strategy and commentary service that a finance pro can subscribe to and present to clients as their own.

(3) Social Financial Media. Financial markets are based on bets, and financial media tries to corral the rationale for those bets. If there was one place that could possibly corral all that security-level rationale, social media technology could re-distribute it all as streams for users to follow. This is what StockTwits does. It’s like Twitter, but you follow ticker symbols so you can get realtime rationale for why investors are betting on those securities. Talk about the future of financial media.

The Day Journalism Died
Tuesday, July 25, 2006 will forever be known as the day journalism died. It was presumed dead for years, but nobody really knew for sure. Not until Stephen Colbert gave journalism a proper burial on Tuesday night when he responded to attacks from NBC News and ABC News that he was playing politicians for fools on The Colbert Report.

Jake Tapper, a senior correspondent for ABC News, asked: “With the reputation damaging risk associated with an appearance on The Colbert Report, why do politicians keep going on the show?”

Colbert’s answer: “This show is the news. Not only is this show the news, evidently it is news. It’s gotta be news because you morning shows are the news and you’re doing reports on it. So I guess Congressmen come on my show in the hopes that you’ll use their appearance on my show on your show.”

Forbes, CNN, USA Today, and however many other media outlets joined ABC and NBC in reporting on Colbert’s recent interviews with Congressmen Robert Wexler (D-FL) and Lynn Westmoreland (R-GA). Interviews in which he gets them to say crazy things or reveal their lack of knowledge about their jobs. This means all of these so-called purveyors of journalism have absolutely no defense against Colbert’s claim. These journalists using a comedy show as a source also means that people should let go of any hope they have that objective reporting of facts is still alive.

Nobody knows precisely when journalism started dying, we just know that it happened while the internet and 24-hour cable news mushroomed. Maybe it was in October 1996 when Ronald Reagan’s and George Bush Sr’s closest media advisor Roger Ailes created and launched Fox News – an event which marked the official transformation of TV news from journalism into partisan political strategy.

Or maybe it was January 30, 1998 when Jake Tapper published a Washington City Paper cover story titled I Dated Monica Lewinsky; the piece that ran less than two weeks before the story of Lewinsky’s ‘relations’ with Bill Clinton broke, and marked the official transformation of political journalism into global entertainment.

Or it very well could have been in January 1999 when overgrown frat boy Craig Kilborn lost the Daily Show top job to the more politically-minded Jon Stewart. The strength of the Stewart/Colbert satire model has since grown so strong at uncovering and reporting facts, it’s sparked questions as to whether their shows should be considered a news source. But isn’t this debate relevant for all other news sources too?

If formats (satire, humor, entertainment, political strategy, etc) have killed journalism’s core tenets of objectivity and balance, now it’s just a matter of who presents the most credible information. In a reporting era dominated not by fact but by format, the real question is: who’s doing their research? Is it a guy like Colbert who knows more about all our country’s Congressman and districts than just about anyone? Or is it the ABC News correspondent who’s playing Texas Hold ‘Em with a chimp?

And so shouldn’t Colbert be praised, not attacked, for challenging Congressman Westmoreland on his lazy, lemming-like policies — regardless of the format in which he poses these challenges? Or should Jake Tapper just cut his Real Journalist losses and go back to the news-as-entertainment model he used to sneak his way into hard news?

Here’s the Colbert Report clip that sparked all of this. You decide.

]]> http://thebasispoint.com/2011/01/03/the-hopeless-future-of-financial-media/feed/ 0 http://thebasispoint.com/2009/06/29/dylan-ratigan-lands-at-msnbc/ http://thebasispoint.com/2009/06/29/dylan-ratigan-lands-at-msnbc/#comments Tue, 30 Jun 2009 05:14:18 +0000 TheBasisPoint http://www.thebasispoint.com/?p=2277 Three months ago, I wrote an Open Letter to Dylan Ratigan with my case as to why he should stick with financial media after his departure from CNBC. At the time I laid out two options that seemed most probable for him:

So as you evaluate new options, I am sure there are many but as I see it, they basically fall into two camps: (1) extreme consumerism, which you’ve proven you can do, (2) smart, actual financial news for financial professionals.

As it turns out, he chose option one and took a job anchoring a new show launched today called Morning Meeting on MSNBC. This is disappointing to me and a waste of his considerable talent with financial news. But as I said in the Open Letter, there’s more money in option one, and I guess a financial guy who’s paid his dues is inclined to go for the money. The problem with straight consumer news is that it’s mostly rhetoric and bile rather than research and report. The new CNBC since August 2007 has taken financial news, normally a space where research and report is hard to stray from, and turned it into rhetoric and bile. I attribute this to two primary things: (1) their need to compete with Fox Business which launched October 2007 with a FoxNews signature inflame-the-consumer approach, and (2) the fact that the financial crisis blew wide open in August 2007 and instead of becoming an analytical voice of reason, CNBC instead chose to stoke the fire and outrage with consumers.

I had written off CNBC but held out hope for Ratigan. Now he too looks to be off the trusted financial media players list. Unfortunate but again, can’t fault the man for taking the paycheck.

]]> http://thebasispoint.com/2009/06/29/dylan-ratigan-lands-at-msnbc/feed/ 0 http://thebasispoint.com/2009/06/25/cnbc-interview-warren-buffett-on-us-economic-war/ http://thebasispoint.com/2009/06/25/cnbc-interview-warren-buffett-on-us-economic-war/#comments Thu, 25 Jun 2009 18:09:54 +0000 TheBasisPoint http://www.thebasispoint.com/?p=2269

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